The market’s exceptional performance in 2024 was powered by a resilient economy, declining inflation, and 100 basis points’ worth of interest rate cuts, creating a fertile environment for growth. AI-driven initiatives propelled technology giants and the broader market to record-breaking highs, reshaping industries and fueling innovation.
Noteworthy transactions included KKR’s $11B acquisition of Cotiviti in February and TowerBrook’s $7B acquisition of R1 in August. On the private placement front, XAIRA’s $1B funding round for drug discovery and Sedgwick’s $1B raise for tech-enabled services stood out as landmark deals.
Both M&A activity and private placements mirrored this upward trajectory, with average deal sizes surging significantly compared to 2023. While investors exhibited greater caution, they favored fewer but larger, high-impact transactions, signaling confidence in long-term opportunities.
Despite the lowest deal volume in three years, with 642 private placement transactions, total deal value climbed to $16B – up 26% YoY. Larger deals defined the landscape, with seven raises exceeding $100M in Q4 alone. This drove the average deal size to $26M, marking a 60% increase from 2023.
The Digital Health sector was a standout performer in M&A with activity totaling $62B in 2024, a staggering 106% increase over 2023. Deal volume rose modestly by 6%, while revenue multiples passed 6x, outpacing public market valuations and solidifying confidence in the sector’s long-term prospects.
Looking ahead to 2025, the momentum shows no signs of slowing. Vendors can now start shifting their focus from profitability and operational efficiency to innovation. Coupled with an elevated level of dry powder from institutional funds, heightened deal activity should ensue.
Key Highlights in Q4:
- Our Digital Health Index underperformed other indices in Q4 and grew 17% overall in 2024.
- The LTM revenue multiple for our public index ended the quarter at 4.1x.
- Among private placements, deal value rose by 26% vs. 2023, while volume lagged.
- M&A activity saw a remarkable 106% increase over last year, reaching $62B. LTM valuations also surpassed 6x revenue.
- Health Systems maintained its position as the leading end market, with Life Sciences establishing itself as a strong contender.